Why consumer prices may not see the same spike that PPI did

After another spike in wholesale costs, Wall Street is sure to pay greater attention to Thursday’s report on consumer inflation.

Consumer prices have been been quite tame over the past few years, the result of sluggish economic growth and fierce global competition for customers. Yet they have been on the rise lately owing to escalating food, energy, housing and health-care expenses.

In April, consumer prices are forecast to rise 0.3%, according to economists polled by MarketWatch. That would mark the biggest advance since last June. And a big jump in wholesale inflation in April and March suggest an even larger gain.

Now the caveats. The wholesale inflation index underwent a major overhaul in January and economists doubt its reliability. What’s more, higher wholesale costs rarely translate into similarly sized increases in consumer prices.

Still, consumer prices have also been on the upswing. They are up 1.5% over the past year and that could rise to close to 2% in April. Just a year earlier, consumer inflation was growing just slightly faster than 1% a year.

Is pressure on consumer prices likely to ratchet up a lot further? Economists are skeptical. Energy costs have been stable and a surge in food prices is expected to recede later in the year. The economy would probably have to grow much faster to cause inflation to spurt and to truly alarm the Federal Reserve.

Also on Thursday, investors will get a look at weekly jobless claims and a pair of reports on regional manufacturers. And Federal Reserve Chairwoman Janet Yellen is address the U.S. Chamber of Commerce after U.S. markets close.

Jobless claims fell sharply last week after surging in late April. Economists project a small increase to 321,000 in the week ended May 10.

The Empire State and Philadelphia Fed manufacturing surveys, meanwhile, are both expected to show expansion in May similar to levels seen in April.